Rite Aid's first-quarter earnings tumbled 55 percent, mainly on costs tied to a $2 billion acquisition, and the drugstore chain lowered its 2016 profit forecast.
The Camp Hill, Pennsylvania, company booked $36 million in pre-tax costs tied to its pending acquisition of the pharmacy benefits manager EnvisionRx.
Rite Aid announced that deal in February, steering the chain toward a potentially lucrative field for health care companies. Pharmacy benefits managers manage prescription drug costs, a growing concern for employers and insurers.
Rite Aid also expects EnvisionRx, based in Twinsburg, Ohio, to help it fill more prescriptions for specialty drugs, complex and expensive medicines that are now a growing source of revenue for drugstore chains and pharmacy benefit managers. Rite Aid expects the deal to close by early next month.
The company earned $18.8 million, or 2 cents per share, in the quarter that ended May 30. That compares with $41.4 million, or 4 cents per share, in last year's quarter.
Earnings, adjusted for costs related to mergers and acquisitions, were 4 cents per share in the most recent quarter.
That topped average analyst expectations of 2 cents per share, according to Zacks Investment Research.
Revenue climbed nearly 3 percent to $6.65 billion in the period, which met forecasts.
"The company's core retail turnaround is progressing, recent acquisitions should eventually fuel share gains, and the company remains an attractive (merger and acquisition) target in a consolidating industry," Credit Suisse analyst Edward Kelly wrote.
Rite Aid said it adjusted its fiscal 2016 forecast to account for the EnvisionRx deal and costs tied to some debt refinancing. It now expects full-year earnings to be between 14 and 22 cents per share. In April, the company had forecast 19 cents to 27 cents per share.
Analysts expect, on average, 24 cents per share, according to FactSet.
Rite Aid shares slid more than 4 percent, or 37 cents, to $8.55 before markets opened Thursday. The stock has risen about 19 percent since the beginning of the year and 25 percent over the last 12 months.